If advance-fee loan ads sound too good to be true, they are

STAYING AHEAD

NEW YORK -- An anguished friend telephoned me last month to say he was near bankruptcy. He'd started a small business that had been running in the black. Then his major client failed. Ever since, he's been paying his business bills with credit cards. But that string is running out.

Frantic, he had spotted an ad in the newspaper headlined, "Bad credit? We lend," and was daring to hope. "I suppose it's a high-interest loan," he said, "but it might carry me until I get

some more clients. What do you think?"

What I thought can't be printed in a family newspaper.

My friend had almost been fleeced by an advance-fee loan scheme. On calling, I learned that the "lender" wanted $200 up-front for what it claimed was a "government-authorized" low-interest loan.

Had my friend sent the money, he would never have seen it again nor would he have gotten the promised loan. Phony lenders like these reel in the checks, then disconnect their phones. Soon after, they're advertising again, using a different name and address.

Just ask Pamela Alston of Philadelphia, who saw an ad for loans of $5,000 and up. She called, gave her financial data, and was promptly "accepted." The initial terms: Two months payment in advance ($213), due within 48 hours. She sent the check by Federal Express. Three days later, however, says she was told that her loan had not been approved, after all. Her $213 was not refundable.

And ask La Donna Miller of Columbia, Md., who applied to a firm called Allstate Financial Services in Dallas (no relation to Allstate Insurance, but the similarity of names is no coincidence; she thought she was dealing with the real Allstate).

Miller sent a $199 "application and processing fee," but the loan never materialized. When she demanded her money back, the answer was, "no refund until you're rejected by five lenders."

Today, Allstate Financial's phones are disconnected. The Dallas Better Business Bureau says it has shut down (or perhaps opened elsewhere, under a new name). Victims are advised to report their story to a local office of the FBI.

Advance-fee loan scams now make up the largest number of complaints to local BBB offices, according to the Council of Better Business Bureaus. Since the start of the year, Cincinnati has had 9,400 calls, Phoenix 6,000 calls, Dallas 4,000 and New York City more than 7,000. Even small towns are feeling the octopus arms of long-distance theft conducted by WATS-line. The BBB in Alexandria, La., says "This has been our number one topic of inquiry since June 1991."

One such operation in Tucson, Ariz., did business for just 90 days, the CBBB says. During that time it collected 1,702 checks for $249 each a total of nearly $424,000. Some small-business people have been stripped of $10,000 or more, in a desperate search for million-dollar loans to keep their firms alive.

A reporter for this column called nine advance-fee loan shops that advertised in newspapers. None would send her information until she sent a check. Up-front cash requests ranged as high as $299. All wanted some personal financial information that could be used in other scams, such as her bank account and Social Security numbers.

Some states prohibit or restrict advance fees for loans. Florida, until recently a national haven for advance-fee scamsters, recently made most such fees illegal. That law, backed up with vigorous enforcement, is pushing the loan shops over the border into Georgia and North Carolina, as well as other states.

I have two burning questions about these scams:

Why do newspapers and magazines keep on taking ads for advance-fee loans? The papers earn a few bucks for selling a classified. But they hurt their trusting readers, many of whom think that the paper screens the ads it takes. You'll also hear these scamsters advertising on radio and cable TV.

And why do so many people respond? Even the desperate must know in their hearts that no one lends money if you're already drowning in debt. If you're tempted anyway, call the Better Business Bureau in the town where the "lender" claims to be based (assuming that it tells you the truth). You'll get an earful.